When Single-Family Housing Becomes Luxury Housing

Property values in Minneapolis and the surrounding metro area have been rising rapidly for the past several years, and there’s little evidence that the trend will stop anytime soon. Properties are on the market now for a matter of days (or even hours). Multiple buyers often end up in bidding wars at prices which far exceed the original asking price. As the Star Tribune noted in a recent article:

The most severe shortage is for houses priced at less than $300,000, the ones sought by first-time buyers and retirees who are downsizing.

Of course, rising housing prices impact renters as well as those looking to buy. More people are moving to Minneapolis every day, whether renter or homeowner, and they want to live in desirable neighborhoods like mine (Whittier). My neighborhood features sought-after amenities like bike trails, high-frequency transit, close access to downtown, and a ton of great restaurants on Eat Street. But one “problem” is that people are moving here whether or not there are new apartments for them to live in.

Largely due to increased demand, rental prices are also quickly rising throughout the city, with the average rent for a 1BR in Minneapolis topping $1,000/mo last year. In the Whittier neighborhood, my rent was $650/mo when I moved back here in 2012. Earlier this month, I was given the option to switch to a month-to-month lease for $825/mo. That’s an increase of $175/mo in just four years. I have no doubt that someone will happily pay $825/mo to live in my 600 square-foot apartment inside an old brownstone building.

I know I’m not the only one feeling the squeeze of higher rents. I live in a great location and someone else is probably willing to pay more for it than I am. But it’s not the stereotypical gentrification scenario that’s pushing renters like myself out of the neighborhood. Instead, it’s the lack of available housing which drives prices upward.

Lowry Hill East and New Apartments

Nowhere is the upward trend on property values more apparent than in the Lowry Hill East neighborhood, where land values often exceed the value of the structure on the property. One recent example is at 2008 Bryant Ave S., where a developer purchased a duplex for $275,000 near Franklin and Hennepin for the purpose of tearing it down to build a 10-unit apartment building. Nearby neighbors showed up at the Minneapolis Zoning and Planning Committee to rail against the project:

Despite my familiarity with the neighborhood, I was surprised by the amount of vitriol demonstrated in this public hearing, not only against this small apartment building but also the City of Minneapolis. This particular project creates much-needed “missing middle” housing, replacing a duplex with a 10-unit apartment building. This is the type of small-scaled infill which has been sorely lacking in a desirable neighborhood which has resisted developments for over 40 years.

The developers of 2008 Bryant have also been buying other properties in this neighborhood, with the intent of building multi-unit apartments on them. I have a feeling that many of the homeowners (and yes, it was exclusively homeowners) who showed up to speak against this project are not feeling the pinch of a tight rental market.

Speaking to MinnPost, Nick Magrino of the Planning Commission (and somewhat more prestigiously, streets.mn) said this about the developers of 2008 Bryant: “They’re pretty much the only people who are doing that small infill on any kind of scale. They have several projects going on where they’re building four- or 10-unit buildings, and not a lot of people do that.”

As in the Whittier neighborhood, there are many factors driving Lowry Hill East’s high property values even higher. This area has some of the best transit infrastructure in all of Minneapolis. Metro Transit Routes 2, 4, 6, 17, and 21 all connect this area with other parts of the city, and the 113 and 114 connect Hennepin and Lyndale Avenues to the U of M campus. The area has walkable access to several lakes, multiple commercial corridors, the Midtown Greenway, and relatively low crime rates. It’s also just a mile from downtown Minneapolis.

Luxury Living

Many who showed up to speak against this apartment project are nearby homeowners, who obviously have no use for an apartment building since they do not rent. Many of them have invested a lot of money to live in large single-family homes in this neighborhood. That’s fine, as a diversity of housing stock is healthy for a neighborhood.

But when a single-family home is on a lot where many people could live but do not, we need to acknowledge this fact: amid the cries of gentrification from well off homeowners, it’s these houses, not new apartments, which are luxury housing. It is a luxury to live in a 6-bedroom, 3-bathroom 3,000 square foot house, especially one that is close to downtown and in a safe and walkable neighborhood. I don’t begrudge it, and there’s nothing wrong with it. But it should be acknowledged.

While the Zoning and Planning Committee decided to move forward on this project, there will be opposition to similar projects by these same homeowners, who aim to keep multi-unit rental housing out of their community. The City of Minneapolis cannot allow small groups of homeowners to shut out projects that benefit renters. Uptown has some great amenities, and by building, we allow more people to enjoy them.

29 Responses to When Single-Family Housing Becomes Luxury Housing

Thank you for your story and I agree that the “missing middle” is a problem and will continue to be a problem in Minneapolis unless some changes are made to undo zoning laws that encourage high end single family.

It should be noted however, that increases in rents also create significant housing challenges for the lower end of the economic scale. In the particular case of the Colfax properties, a dozen or more people lost their housing. This was not simply a duplex but a rooming house that served a hidden population of our City. The zoning code does not allow for that type of housing outside a designated area downtown. Loosing that very affordable housing in our neighborhoods creates even greater housing challenges for many residents.

The complaining homeowners who live in houses that were once boarding houses should reflect long and hard about their own guilt in this before griping about a boarding house being turned into apartments. Seriously.

Any house whose current market value, were it sold on the market today, is high enough where the buyer’s monthly mortgage is about the same or more than the monthly rent in anything smeared as “luxury apartments” … that house is a luxury residence too.

Not true. One builds equity over the long-term, the other only has value in the here-and-now.

I chose to forefo having fancy extras like pet concierge, granite countertops, swimming pool, tanning room, etc. so that I could have a long-term place to live that could stem the tide against inflation.

Mathematically and emotionally speaking, it was the wiser option. So no, my home is not a luxury home by any stretch of the imationation. It is a place to live that will one day be totally my own.

But a boarding house for 12 low-income individuals was not within the universe of possibilities for land use at 2320 Colfax. The house would have possibly been converted into a luxury duplex/triplex (units $300+k) at best, but more realistically would have been converted into a SFH — that’s what the neighbors want after all — worth $500k or more. The reality is that affordable housing was not an option for 2320 Colfax – especially keeping the old house – barring some significant government intervention and expenditure.

Motiv Apartments may not be “affordable” but they are more affordable, and provide housing for more people, than any of the other alternatives that were on the table.

The other thing to acknowledge is that thanks to zoning, it’s really easy to “protect” single family homes in the area and really hard to get missing middle development. Rejecting them on the few parcels that are already zoned for them would be insane.

“I have a feeling that many of the homeowners (and yes, it was exclusively homeowners) who showed up to speak against this project are not feeling the pinch of a tight rental market.”

This is a lie. I am a renter. Also, 2008 Bryant is not currently a single family home. The rents here were affordable. These “developers” own around 80 properties in the city and have torn down at least 7 in the Wedge alone. These have been green lighted with out the proper procedure.

I doubt a group of renters pooled their money to hire a Strategic Communications specialist, who owns a house down the street from this project, to speak out against a new rental development. I stand by my claim that only homeowners spoke out at the hearing.

I assume you have never rented, noise is certainly an issue as a renter. As Anton assumed Mr. Boyle only represents home owners. You people really need to review your facts if you want to be taken seriously. All the information was provided in the above links but I also assume you are all to lazy to read the documentation.

Renters do bring noise and other problems. What planet are you from? Anytime you have many people in a small area, especially with stick constructions paper thin walls, there will be increased noise as well with a roof top deck. This is common sense. I know you people are all for density no matter what. I was just trying to correct the record but you don’t want anyone’s opinion but your own false narrative.

I don’t think Anton’s point was that all teardowns-for-apartments have been luxury single family homes. In fact, I’m not sure this has been the case at all in recent years (ever?). It usually takes a depreciated structure (such as a single family home turned duplex/triplex/boarding house) to sell at a price where teardown and new construction (be it a new McMansion or a small apartment building) make financial sense. It’s highly unlikely someone could afford to buy 2400 Bryant, a SFH in excellent condition, tear it down and put up a condo/apartment building.

But more central to your point, while 2008 Bryant was a shining example of housing filtering – low rent units in a desirable area in a formerly-expensive structure – the admittedly sad loss of two affordable units still benefits renters like yourself. The net gain of 8 rental units (13 net bedrooms added) means that there are potentially 13 fewer people out there to outbid you for your apartment when your lease term is up. We can argue whether supply increases at a hyper-local level matter in the same way they do on a city or regional basis, but that effect is still there.

Could you expand on how the procedure for green-lighting this project was improperly handled?

If someone or a family can afford to own and renovate a single family home and live in it while paying the property taxes and keeping it nice should not be looked at as a luxury. They are probably having to cut cost everywhere else to maintain that home. I know from experience that when a quite block of single family homes is invaded my multi unit complexes, the area crime rate rises. Noisy car sterio, loud parties, tend to multiply. I applaud the homeowners for standing up for their neighborhood and their investment. The reason property values and rents have risen so high is because we are being taxed to death to reinvent downtown Minneapolis.

About the point Kris Brogan made – is there a group advocating for different rental laws, ones that allow for more unrelated people? That’s a really efficient (and common, even though it’s illegal) way to get more density and lower rents. But under current rental licenses and rules it makes it hard to report actual safety concerns and work out landlord/tenant issues because both sides will lose out if the city notices what’s going on – the landlord will be shut down and lose the rental income, the tenants will be evicted.

I’ve heard of/seen news articles about efforts to make changes in specific neighborhoods or situations, but is there a larger effort going on?

Yes, intentional communities are pushing to get that law changed. I don’t know how much that would necessarily add density, as the law is rarely enforced anyway, but it would certainly be a step in the right direction.